I’m not hear to call the top in oil and I know if part it has skyrocketed because of the sharp decline in the dollar, but there is no justification for oil at $110 per barrel.

It’s my belief that much of the price of oil has been driven by Wall Street traders.  The hedge funds make massive leveraged trades in the oil market.  If it’s anything like the other hedge fund trading that has gone on, they could leverage 20-30x their money.  As liquidity continues to come out of the system and we are now unwinding all of this leverage, I suspect the trades in the oil market will not be immune to what we’ve seen in the other markets where a retrenchment in leverage occurs rapidly.

I cannot find the article that I had read, but something was published in a prominent news paper, where an analyst was quoted as saying we need to start thinking about and operating in an environment where we have permanent $85-$95 per barrel oil.  When I start hearing prominent analysts start to talk like this and people start to agree and build their business plans around this, it tells me we can’t be far from the top.  Now oil might very well go to $150 in the next 3 months, but there’s no reason it shouldn’t collapse to $40 per barrel sooner rather than later.

Markets are designed to take as much money away from the most amount of people possible.  It seems that everyone is now long oil and expecting it to continue on.  Is this thinking any different than 1998 and 1999 during the tech boom?  How about 2004-2005 in the housing market?

I suspect we’ll see the oil trade start to be unwound within 6 months of the presidential election.  It’s been on a tear since President Bush took office and now that he will be leaving, it will be interesting to see if the price of oil coincides with his departure.

One of the ongoing problems in the real estate business these days is that the banks have taken over the position of the builders in being the tip of the spear in the market.  It used to be the builders were the tip of the spear and that they had a disproportionate impact on the market for the amount of business they did.  New construction drove pricing.  But now with the slowdown, the builders have aggressively reduced the number of home starts and their impact is lessening by the day.  However, with the rise in more bank owned property, foreclosures and short sales, the banks are now the focal point.

It’s been my experience that the banks are, almost as a group, completely unresponsive.  The biggest challenge we are going to face in this market is to clear out the inventory.  Anyone who runs a business knows that if you have an oversupply and want to get the company back on track, you need to move the inventory.  Also, if you want to get some growth back, you need to accelerate the overall turn in inventory.  Look how many times Dell and Intel turn their inventory each year.  But since the banks are in charge, there is no turn in inventory.  In many ways it’s just all come to a grinding halt with regard to these properties.  Oh sure, there are many that sell provided you have a buyer who doesn’t mind waiting 6-12 weeks before they hear a response on the offer you put in.

So you might ask….if banks take so long, why should we be concerned about it?  Just go find a home that is being sold by an individual so that you can negotiate faster.  Here’s the problem.  In many areas, it is the bank own property that is driving pricing.  The longer a home sits on the market, the less it ultimately sells for and the more pressure it puts on the other homes in the neighborhood.

I know the banks might be overwhelmed, but they didn’t seem to have a problem gearing up to sell all the funny money mortgages they had to sell the past several years.  That’s right…they were too busy making billions of dollars.  Now that they are loosing money, they could care less if everything else feels the pain as well.
In talking with a friend of mine, I explained what I was experiencing.  He said perhaps they are waiting to be bailed out by the Federal government…i.e. the U.S. taxpayer.  And sure enough, in the past couple of days, I see that Senator Barney Frank has proposed exactly that.  So for those of you who think, “thank God I didn’t get involved in this mess.”  You are going to be involved.  Mark my words.  You are already involved because this mortgage mess and lowered the value of your home and you will be involved because President George Bush and the U.S. Congress are just going to add this to the taxpayers’ bill.

With the coming layoffs of hundreds of thousands of Wall Street bank employees, perhaps they could be redeployed and retrained to answer phone calls from agents and negotiate quickly on all the property they own?

I realize Congress is not interested in helping the situation, but rather playing politics….but let’s just say if they wanted to help the situation, they would pass some laws and regulations regarding bank owned property and short sales and require the banks respond within a certain period of time or else face fines and other regulatory punishments.  Put a sun set provision on it until the end of 2009.  For those of you who say let’s not have the government interfere with the banks on this…by definition, the banks with Federal charters are heavily regulated and interfered with by the Federal government.  This would just be one more regulation they have to deal with.

The banks have managed to tick off a lot of Realtors when they don’t realize the Realtors could play a big, positive role in helping the banks move these properties.  Instead, by their lack of responsiveness and unrealistic expectations, there are many agents who can’t stand working with them.